Intel, Inside And Out

Paul Otellini is not an engineer, but after 34 years at Intel, he's learned to think like one. He became CEO in 2005. Since then the semiconductor giant has recovered much of the mojo that was in question in the mid-2000s, when archrival AMD challenged it, as both marketed new "multicore" chips that are now the rage. (This integrates several microprocessors into a single chip.) A corporate overhaul and a commitment to competing in the Core Wars righted the ship—2007 revenues were $38 billion, up 8 percent over 2006; net income rose 38 percent to $7 billion—even if the stock is still listless. (The AMD rivalry has expanded to the courts, as the United States is looking into AMD's antitrust charges against Intel, and the EU has filed preliminary charges against Intel on the same complaints.) Otellini spoke to NEWSWEEK from his Silicon Valley headquarters.

Levy: You've said Intel will be a big player in "the personal Internet." What's that?Otellini: We now have a "go-to" Internet. You go to search for something, you go to a Web site, you go to buy something. I think a better model would have the Internet come to you. The Internet would be interpreting things for you, translating signs for you, giving you directions when you need them, as opposed to when you ask for them.

What's Intel's role in that?If the Web becomes this more immersive environment, it will need to have a lot more intelligence. It will require a tremendous amount of processing power to make it real. We think that every consumer electronics device in the not-too-distant future will connect to the Internet one way or another, particularly those that handle video, and in that is a value proposition for us, because the Internet today runs on Intel architecture.

What does the economic downturn mean for Intel?In previous recessions or downturns, most corporations tended to invest in productivity tools, which is the way you improve your performance. I don't see that fundamental model changing. Even in the financial-services sector, which is obviously the most hard-hit, we're still seeing significant investment in the back offices for their infrastructure, for the trading algorithms. [Also], 75 percent of our revenue is offshore. We've not seen change in consumer-purchase patterns globally.

Intel is a big investor in the long-range wireless technology called WiMax, but so far we haven't seen it. Are you still optimistic?Very much so. Global networks take a while … [The high-speed mobile technology] 3G is now, what, 15 years old and not deployed? We're only four to five years into WiMax, which will happen a lot faster. You'll see some fairly large-scale deployments happening over the course of this year and next.

Do you think Intel is being treated fairly in the EU investigation?I can't give you an answer to that until after I see what they resolve. We'll know in a matter of months.

Do you believe your competitor AMD is pursuing in the regulatory arena what it can't do in the marketplace?Ask Hector [Ruiz, CEO of AMD] that question.

How significant is your Apple relationship?It has been a very fun relationship and very positive. They're a top 10 customer. I think things like the MacBook Air and Apple's use of solid-state drives are continuing to push the envelopes there. Apple and Intel very much alike. We are deeply engineering-driven, we're passionate about our products and we're willing to invest to get the best products. And then hope the markets decide accordingly.

Has Intel's relationship with Apple or the fact you're on Google's board affected your relationship with Microsoft?Not from my perspective. Microsoft is still our largest partner in computing. Obviously there are things that Intel does that sometimes might irritate Microsoft, and probably the converse is true. But that's life. That's the nature of competition in the computing industry.

How do you think Microsoft will miss Bill Gates's full-time presence?I don't think companies are ever any one person. Even under Andy Grove, Intel was never just Andy, and he was as forceful a personality as Bill was at Microsoft. There are tens of thousands of people below them that actually were there during and well after their reigns. It's the impact of people like that that determines the culture and the dynamism of the company.

You're building a huge chip-making facility, or fab, in China. Do you think the next Intel will be Chinese and if so, would it be particularly tough for you to compete with something arising from there?I believe the next Intel is the current Intel. Intel has continually reinvented itself decade after decade in its history, and I think a lot of the initiatives that we're tapping into today are going to allow us to continue to be the largest and best semiconductor company in the world. So I don't see that changing. We're in China because of the market dynamics and the economics of the factory there, and it makes good business sense.

As a young man you worked summers in a slaughterhouse. What did you learn from that?To go to college.